Calling the Piper’s Tune

April 28, 2015

Nonprofit endorsements for sale? That might be the takeaway when more than thirty charities in the District of Columbia write to government regulators in support of a popularly opposed regulatory action sought by a local funder, with many even lending their logos to full-page newspaper ads.

Pepco, a regional electric utility that serves the District (and mid-Atlantic region) wants to sell itself ­to Exelon, a national energy company with a poor reputation among environmental groups and consumer advocates. The overwhelming majority of the charities endorsing the acquisition in letters to DC's Public Service Commission (DCPSC) have a couple of things in common: they have no environmental mission or apparent expertise on energy issues, and they have received or benefited from Pepco philanthropic funding, which Exelon promises to continue for ten years.

The offered premium of 24 percent over market valuation is enough to convince Pepco to seek approval to sell its electric distribution network to Exelon. The opportunity to become the largest utility company in the country and use Pepco’s significant ratepayer base to dilute its nuclear electric generation investments is motivation enough for Exelon. But what’s in it for local charities?

A big part of the answer was summed up nicely by Meta Williams, the regional development director in the United Negro College Fund's Washington, D.C. Area Office. In a letter to D.C Public Service commissioner Brinda Westbrook-Sedgwick, Ms. Williams noted that Pepco and Exelon are important donors to UNCF, provide a great deal of support to other charities, and are admirable corporate citizens, making their plan worthy of endorsement. Yet, she went on to say in conversation with me that she had not considered environmental, energy, or related issues in deciding to write to the Public Service Commission, that policy was not made in her office, and that she was speaking only for UNCF's fundraising arm and not for the organization itself – none of which is clear from her letter.

Although the Washington Area Women's Foundation directly refused to discuss its letter in support of the acquisition, it likely made a mistake when, in addition to mentioning the importance of Pepco funding for it and other charities, it asserted that "Exelon's reputation as a leader in environmental policy… augers well for citizens of the region." In fact, a number of environmental organizations, including Climate Action, Empower DC, the Energy Justice Network, the Environmental Network, Friends of the Earth, Food and Water Watch, Green Neighbors, Interfaith Power and Light, the Mid-Atlantic Renewable Energy Coalition, the Nuclear Information & Resource Service, Solar United Neighborhoods, and the Sierra Club, all oppose the very deal WAWF wrote to support.

Their silence on this matter and their refusal to be accountable for their support of such a controversial plan is profoundly irritating. While the financial health of an organization may seem like the most important thing to its leaders, forsaking the broader common good for the narrow interests of any charity is something we should not condone.

The tone, tenor, and structure of most of the letters in question betray another commonality among the organizations endorsing the Exelon/Pepco proposal. After reading the letters, it strains credulity to suggest that they were not solicited or that writing guidance was not provided by someone.

Pepco refused to make anyone available for an interview and asked that all my questions about charities’ support for the acquisition be directed in writing to their media relations staff – which then declined to answer, instead issuing a boilerplate public relations statement saying that the company had "actively shared" information with its "nonprofit partners."

A few of those partners did agree to chat – sort of ­– on the record about the endorsement letters they sent to the commission. The head of Samaritan Inns, for example, said he was "not in a position to comment on that" when asked to discuss what brought him to pen an endorsement of the deal other than to say that "our relationship with Pepco is a very valued one and I need to leave it at that."

Elsewhere, a staffer at Goodwill of Greater Washington regretted failed efforts to set up an interview with the organization's president/CEO and instead emailed his answer to a series of questions. In response to the question, "Did Pepco or Exelon solicit a letter in support of the merger?" the organization said that although Pepco had been a funder for a number of years, "they neither required nor demanded that we write a letter in support of the merger." (Emphasis added.)

Similarly, the director of the Anacostia Community Outreach Center said his organization did not receive "direct funding" from Pepco and was not asked to contact the DCPSC, and, moreover, that he often wrote unsolicited letters regarding important policy issues. When asked if he had been aware of the considerable opposition to the merger by environmental, energy, and consumer groups, he insisted that he endorsed Pepco's proposal regardless of whether environmentalists and others might have protested the corporations' plans because it "is firmly rooted in a culture of philanthropy."

But does the support he's talking about really count as philanthropy? Decades ago, as corporations were beginning to put their independent foundations under the control of their marketing, communications, and public relations departments, people began to realize that the motivation for such moves had more to do with profit than the public good. In embracing that principle, Pepco and Exelon certainly are not alone.

For example, the New York Timesreports that Comcast followed a similar approach in recruiting nonprofit organizations to support its proposed takeover of Time Warner Cable – a now-abandoned deal that would have further limited consumer choice in much of the Northeast and mid-Atlantic region and ultimately, according to experts, led to higher cable fees for millions of people.

The pattern of corporate funders using grantees to support their cause was raised to a high art by tobacco companies and today extends to major sports team foundations in California pushing for special charitable raffle legislation that would benefit their associated for-profit franchises. CEO Jan Masaoka said CalNonprofits is dismayed the leagues are contacting nonprofits that have received grants from team charities seeking to influence a public policy matter on an issue far afield from the nonprofits' missions.

I'm willing to concede that Pepco executives may not have "required or demanded" that the company's grantees behave similarly in showing support for Exelon's acquisition bid. But when they and nonprofit leaders assiduously avoid discussion of the endorsement letter process, one can be excused for thinking that maybe the funder suggested to its grantees that their support would be most welcome and took steps to make it easier for them to communicate it.

I sympathize with nonprofit leaders who work hard to sustain organizations that are doing vital work. I really do. In most cases, theirs is a thankless job. But we do the sector and society no favors when we choose to ignore heavy-handed tactics by corporate funders with their own agendas – or give a pass to nonprofit leaders who promote a corporate funder's agenda at the expense of the public good.